Sunday, May 03, 2009

A little bit of cross-strait game theory

With Straits Exchange Foundation Chairman Chiang Pin-kung (江丙坤) and his team of negotiators just back from the third round of cross-strait talks in Nanjing, it is time to dwell a little on the concept of game theory. A branch of applied mathematics, game theory is an attempt to understand human behavior in a strategic context, wherein a party’s success is contingent on the decisions made by another party.

In the context of negotiations, game theory contains four possible outcomes that guide decision-making, which can be represented in the matrix commonly known as the prisoner’s dilemma: win-win, win-lose, lose-win and lose-lose.

How negotiators weigh their options and how they negotiate is predicated on whether they intend to play a zero-sum or non-zero-sum game.